Summaries of health policy coverage from major news organizations

Private Insurers Consider Medicare Premium Increase, HMO Plans

With Monday as the deadline for insurance companies to notify CMS of their intentions to offer Medicare Advantage plans, industry analysts and federal health officials are waiting to see how health insurers respond to the planned 17% increase in Medicare Part B premiums in 2005, the New York Timesreports (Freudenheim, New York Times, 9/9). On Friday, HHS officials announced that monthly premiums for Medicare Part B -- which covers physician services, outpatient hospital care, some home health services and durable medical equipment -- will increase about 17% to $78.20 in 2005. The increase of $11.60 per month is the single largest dollar increase in Medicare's history.

Premiums rose 13.5% this year and 8.7% last year. According to HHS, the major factor behind increased premiums is higher spending under traditional, fee-for-service Medicare, particularly in higher payments to physicians. Under the new Medicare law, payments to physicians in 2005 will rise by 1.5% instead of decreasing by 4.5% as was planned initially. The new Medicare law also calls for increased payments to private Medicare plans, which also contributed to the premium increase. HHS also announced on Friday that the deductible for Medicare Part A -- which covers inpatient hospital care, skilled nursing facilities and some home health care -- will increase by $36 to $912 in 2005 (California Healthline, 9/7).

Increased Enrollment?

According to the Times, some analysts say the higher cost sharing "may prompt some consumers to look anew at Medicare subsidized private insurance programs," which sometimes offer additional coverage options to beneficiaries to attract them to their plans. As a result of the increase in cost sharing, patients with chronic conditions that necessitate longer hospital stays will have higher out-of-pocket expenses -- $228 per day after the first 30 days in the hospital and $456 per day after 90 days. Previously, those patients would have paid $219 and $438, respectively (New York Times, 9/9).

CMS Administrator Mark McClellan has said that some of the cost of the Part B premium increase will be offset through increased coverage for beneficiaries who enroll in private plans. "On net, Medicare beneficiaries are saving money," McClellan said, adding, "The new premiums reflect an enhanced Medicare that is providing seniors and people with disabilities with strengthened access to physician services and new preventive benefits" (California Healthline, 9/7).

Subsidies, Benefits

Enrollment in private Medicare HMOs fell to 4.6 million in 2003 from a peak of 6.3 million in 1999, in large part because many insurers stopped offering the programs following cutbacks in federal payments. The new Medicare law calls for federal subsidies to private insurers to encourage them to offer Medicare Advantage plans, and more insurers can choose to participate in Medicare Advantage as a result, the Times reports. Health plans could use the increased payments to offer enhanced benefits, including better prescription drug coverage, lower copayments or refunds of the monthly premium.

'Wait-and-See' Approach

Paul Heldman, an analyst with Charles Schwab Washington Research Group, said, "We are not far enough along in the process to really know whether or not there is going to be major growth in participation by health insurers." William McKeever, an analyst at UBS, said that many insurance companies likely will take a wait-and-see approach to offering Medicare Advantage plans. Ira Loss, a health care expert at Washington Analysis, said that most large, publicly owned insurers that withdrew from various Medicare markets when payments were reduced in the late 1990s have not yet announced plans to change their participation in Medicare.

Wendell Potter, a spokesperson for Cigna, said the company is not planning to expand its offerings for 2005 but is "re-evaluating for 2006." PacifiCare, Aetna and other insurers said they would not discuss the details of their Medicare offerings until they file their plans with CMS (New York Times, 9/9).

Legislation Seeks To Limit Premium Increases

In response to the Part B premium increase, some Senate Democrats on Wednesday announced at a press conference that they will introduce legislation this week that would limit Part B premium increases to the amount of the cost-of-living adjustment for Social Security payments (Adams, CQ Today, 9/8). The COLA adjustment, set to be announced next month, is expected to be less than 3% (Rovner, CongressDaily, 9/8). The Democrats also said they would limit federal subsidies to private health insurers participating in Medicare. "It's very clear that the Bush administration hasn't told the truth to seniors and isn't on the side of seniors," Sen. Debbie Stabenow (D-Mich.) said. Sen. Edward Kennedy (D-Mass.) added that Bush "failed to protect our seniors from drug companies and the HMOs."

Senate Minority Leader Tom Daschle (D-S.D.) said he would make it a top priority for the remainder of this legislation session to relieve "the extraordinary financial agony and pain" from the premium increase (CQ Today, 9/8). Sen. Barbara Boxer (D-Calif.) said the new Medicare law "is a transfer of money from the pockets of our grandmothers and grandfathers to the pockets of the drug companies and the HMOs" (CongressDaily, 9/8).

Republican Response

Republicans called the Democrats' complaints "political grandstanding" and said they should instead focus on lowering health care costs by limiting awards in medical malpractice lawsuits, CQ Today reports.

Also at Wednesday's press conference, Democrats said that former CMS Administrator Tom Scully should pay back part of his salary, as recommended by the Government Accountability Office. Stabenow said, "He in fact broke the law, and I think he should follow the recommendations" of GAO (CongressDaily, 9/8). In a formal legal opinion issued Tuesday, GAO said that Scully should have to repay about half of his $145,600 salary for last year because he improperly ordered Medicare's chief actuary to withhold from Congress information about the cost of the new Medicare law. Earlier this year, chief Medicare actuary Richard Foster said that Scully prevented him from informing Congress of cost estimates for the Medicare legislation. According to Office of Management and Budget estimates released after Congress passed the legislation, the Medicare law is projected to cost $534 billion over the next 10 years -- $134 billion more than was estimated by the Congressional Budget Office.

Foster has said that the higher cost projection was known before the final House and Senate votes on the legislation in November but that Scully allegedly told him, "We can't let that get out." In an e-mail to colleagues at CMS, Foster indicated that he believed he might lose his job if he revealed the higher cost estimates. Scully has said that he did not threaten to fire Foster if the higher estimates were released. Scully also said that he "curbed Foster on only one specific request" made by Democrats at the time of the first House vote on the Medicare legislation (California Healthline, 9/8).

Related Coverage

Two newspapers on Thursday examined how the Medicare Part B premium increase will affect beneficiaries.